How the founder of a preschool management app cleverly negotiated a $600,000 deal with Mark Cuban and Chris Sacca

Brightwheel
founder and CEO Dave Vasen with his wife and
daughter."Shark
Tank"/ABC

There's never an easy time to leave a comfortable job to start a
business, but it's especially risky when your daughter is six
months old and your wife is on unpaid maternity leave.

That's the gamble San Francisco-based entrepreneur Dave Vasen
took in June 2014 when he left an executive position at AltSchool
to found KidCasa, a preschool management service that later
became Brightwheel.
It's paid off.

After a year of development and the branding relaunch,
Vasen raised a $2.2 million seed round led by Eniac Ventures
and RRE Ventures in June 2015. Just a few weeks later, Vasen saw
"Shark Tank" was having tryouts down the street from his office
and, because he had the idea of applying in the back of his head
for some time, decided to improvise an audition.

He was called back for filming in September, and his
appearance was finally broadcast Friday in the latest episode of
the show's seventh season. It revealed that he raised another
$600,000 from investors Mark Cuban and guest Shark Chris Sacca,
the billionaire investor best known for his lucrative early deals
with Twitter, Uber, and Instagram.

"I'll never forget hugging them after the deal," Vasen told
Business Insider. "I have such admiration for them."

Vasen entered the Tank seeking $400,000 for a 4% stake in
Brightwheel, giving his company a $10 million valuation. He was
hopped up on two Red Bulls he chugged while waiting in the
trailer the producers gave him.

Vasen explained to the Sharks that as the father of a toddler and
as someone who's spent the majority of his career in the
education space, he's seen firsthand that the operators of a
preschool are placed in a uniquely challenging situation.
"They're not just managing a classroom, but managing a business,
too," he said.

Brightwheel is a service that allows preschool owners and
employees to monitor both their paperwork and their students,
with updates linked to a smartphone app for parents.

Here's the app in action:

Vasen launched the pilot program in the fall of 2014 with 10
preschools, and as he stood in the Tank he had recruited 2,500
schools across all 50 states.

Brightwheel is free to download, but a premium account is
available in packages ranging from $40 to $200 per month,
depending on how many accounts will be linked together for a
school. Vasen told the investors his projected revenue was $1
million for 2015, $6 million for 2016, and $20 million for 2017.

In the edited version of the pitch that aired, it appears that
Vasen captured the attention of a few of the Sharks immediately,
but he told Business Insider that the full experience —
which lasted over an hour — was much more stressful.

"It got pretty negative pretty quickly," he said. Daymond John
and Mark Cuban have explained repeatedly that they're always on
the lookout for "gold diggers" — entrepreneurs with no intention
of making a deal who use their "Shark Tank" appearance as a free
commercial.

Vasen realized that he was putting the entire reputation of his
company on the line, and that if he bungled his pitch, he would
be embarrassing himself, his family, and his other investors. He
explained to the Sharks that he was turning to them to get an
adviser on his side who would put in much more work than the
typical investor, and that even though he had accomplished a
level of success with a small team, he needed the help to scale.

That was satisfactory for Kevin O'Leary, who opened up
negotiations by offering $400,000 for 10% equity, cutting the
company's valuation down from $10 million to $4 million.

By this point, Cuban was sufficiently convinced Vasen was the
real deal and began considering an offer because he realized "my
kid's preschool desperately needed this exact type of software,"
he told us.

Sacca jumped in, dismissing O'Leary's sharp devaluation, but
saying he needed to invest on the same terms as the seed round,
where the company was valued at $8.2 million. That meant his
$400,000 would get him 4.85% equity.

Vasen quickly told Sacca the deal sounded good to him, but that
he wanted to see if anyone else wanted to split it.

Sacca mocked the other Sharks, saying that they would be helpful
to Brightwheel if Vasen was looking to make some T-shirts or get
something into Bed Bath & Beyond. "What do you think you need
from the rest of the line here?" he asked.

Cuban was offended. "Are you serious? Are you really that
clueless?"

He jabbed back, saying that when Sacca affiliated himself with a
company, "it adds a lot of street cred to his little part of the
world. Once you get outside of that little bubble called Silicon
Valley, it doesn't mean sh--."

"Uber, Twitter, Instagram operate in their own little world,"
Sacca said sarcastically. "I've never been outside of San
Francisco. Sorry."

Vasen said he was thinking "this is surreal" as the two investors
he had set his eyes on, Cuban and Sacca, spent minutes yelling at
each other from opposite ends of the panel.

Chris
Sacca (far right) had some fun riling up Mark Cuban (far left) on
the set of "Shark Tank.""Shark
Tank"/ABC

Vasen kept his focus and after some more back-and-forth, offered
Sacca and Cuban a joint deal: $600,000 for 6%, split evenly, at
the originally proposed $10 million valuation. Sacca said he'd
compromise by doing that at a $9 million valuation, meaning he
and Cuban would each get a 3.34% stake for $300,000.

Cuban said that worked for him, and Vasen took the deal.

And though Sacca kicked off a spat with Cuban that genuinely got
both riled up, he told Business Insider that he and Cuban
are old friends and that when Sacca took Cuban's offer last year
to appear on a few episodes of "Shark Tank," "I agreed to go on
the show so I wouldn't miss the opportunity to bust his balls in
front of millions of Americans. There is no doubt he adds an
incredible amount of value to his companies. But I'm there to
make sure he doesn't get a free ride anymore."

As for why he invested in Brightwheel, Sacca said, "My best
entrepreneurs always have one thing in common: They radiate a
sense of the inevitability of their success. Dave didn't need to
sell us. Instead you can tell he just knows that Brightwheel is
going to win the space. That's simply irresistible.

"Plus, in the same way that Uber solves a problem for both
drivers and riders, I love how Brightwheel dramatically improves
the lives of hardworking teachers, thrills parents, and empowers
school administrators," he added. "You nail a solution for those
three groups and you've got a huge business on your hands."